VC Investment in Crypto Finally Up in 2024 but Numbers Are Disappointing

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As a seasoned crypto investor with a few battle scars from the market’s volatility, I find the latest VC investment trends intriguing. The recent surge in Q1 funding, especially in infrastructure startups, is a positive sign for the sector. However, I am cautiously optimistic about the projected $12 billion investment figure for 2024.

During the first three months of 2024, the crypto industry experienced a significant surge in venture capital investments. According to a report from the esteemed research company PitchBook, startups received a grand total of $2.4 billion through 518 deals, marking a substantial 40.3% increase in funding and a noteworthy 44.7% uptick in deal activity compared to the preceding quarter.

In the recent business quarter, Together AI, a company specializing in developing open-source decentralized cloud platforms for large foundation models, secured the largest deal. They managed to raise an impressive $106 million in their early-stage funding round, which was spearheaded by Salesforce Ventures. As a result, Together AI’s pre-money valuation soared to a substantial $1.1 billion. Notably, this significant financing comes shortly after their Series A funding round last quarter, where they raised $102.5 million and achieved a pre-money valuation of $463.5 million.

Infrastructure startups took the lead in securing significant funding, with Ethereum layer solution EigenLayer bringing in a series B investment of $100 million. Similarly, Fully Homomorphic Encryption (FHE) development platform Zama succeeded in raising $73 million through a series A round.

Based on PitchBook’s analysis, the optimistic outlook is unlikely to be disrupted by significant market downturns, which could fuel the persistently high investment volume and pace in the remaining months of the year.

VC Investment Projected: $12B or $21B

As a crypto investor, I’ve noticed that while there have been solid quarterly gains for crypto projects, the overall pace of venture capital (VC) investments has decelerated compared to the remarkable surge we experienced in 2020 and 2021. Based on insights from PitchBook’s crypto analyst, Robert Le, we can expect VC investments in crypto to reach around $12 billion by 2024. This represents a relatively modest increase of just 2.4% compared to the $9.4 billion raised last year. Despite Bitcoin hitting new record highs, the growth rate seems to be slowing down.

As a crypto investor, I’ve noticed a significant downturn in investments in the market between 2022 and 2023, amounting to approximately 70%, based on PicchBook’s data. The reasons for this decline are twofold: firstly, high-profile incidents such as the collapse of FTX and the Terra crash have left a lasting impact on investor sentiment. These events, which shook the industry with their magnitude, have understandably dampened enthusiasm for crypto investments.

Many generalist investors, who experienced losses with prior cryptocurrency investments, have stayed away from the market, thereby decreasing overall investment levels. Furthermore, ongoing inflation has constricted the disposable income of retail investors, rendering them more cautious about investing in volatile assets such as Bitcoin.

Le proposed that if the US central bank decreases interest rates, there might be a significant boost in crypto investments. Consequently, venture capital investments could rise by approximately 60% every quarter, possibly reaching a total of around $21 billion for the year.

As a crypto investor, I closely monitor regulatory developments and their potential impact on venture capital investment in the digital asset space. The upcoming US presidential election is a significant factor to consider. Both candidates, Donald Trump and Joe Biden, hold opposing views on cryptocurrency regulation. Trump has been generally supportive of the industry, while Biden’s stance appears more cautious. This difference could lead to significant changes in the regulatory landscape, influencing VC investment sentiment and the broader crypto market.

As a crypto investor, I’ve noticed the contrasting stances between Trump and Biden when it comes to cryptocurrencies. Trump, who has expressed positive views towards digital assets, stands in stark contrast to Biden’s stance, which aligns with SEC Chair Gary Gensler’s stringent regulatory approach. According to Mike Giampapa, a general partner at Galaxy Ventures, if the Republicans win the election, we could see a more favorable environment for the crypto industry. This could potentially lead to an increase in investments and a more welcoming attitude towards digital currencies.

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2024-05-20 14:48